Financial Analysis and Valuation of PepsiCo, Inc.

Abstract

As a leading brand in the food and beverage industry, Pepsi possesses strong competitiveness within its sector and remains highly attractive to investors. For novice value investors, the process of identifying undervalued stocks and assets for potential future growth and returns is a crucial consideration. This article aims to offer simplified information and investment strategies to amateur value investors through the utilization of basic value investment analysis. The study primarily examines the key accounting policies of PepsiCo. Subsequently, it gathers financial data from the 2022 annual reports of PepsiCo and its major competitors, namely Coca-Cola, Monster Beverage, and Keurig Dr. Pepper. Financial ratios are calculated and used as the basis for comparative analysis by applying relevant formulas. Additionally, this analysis includes an evaluation of price-earnings ratios, price-earnings growth ratios, and major risk assessments. The findings indicate that despite having sound accounting policies and a reasonable market-to-book ratio, PepsiCo needs to improve in terms of liquidity, solvency, profitability, and other aspects, suggesting that its stock value might be overestimated. Consequently, it is concluded that there may be better investment choices than PepsiCo at present. Existing investors, however, may opt to retain their holdings and await a more favorable market environment.